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Economic Rationale and the Importance of Cape Town System for Spanish Economy

Despite the initially anomalous process of ratification and the partial accession to the Cape Town Convention for almost 2 years, the decision of Spain to deposit the instrument of accession to the Convention is a clear signal of acceptation of a positive expected economic impact of the uniform system on strategic industries for domestic economy.

Aeronautic sector, airspace industry and high-speed railway[1] manufacturing industry are strategic sectors in Spanish economy that have experienced a rapid and appreciable growth in last years. The accession to the CTC represents a visible impetus to their growth and financing. All these industries are highly innovative, capital intensive and with an intense supranational integration. Spain holds a representative fifth position in Europe airspace market in terms of turnover as well as employment. Likewise, high-speed railway manufacturing industry has been fostered and plays today a notable role in the international scene.

Considering that, it may be affirmed that the Cape Town system is interpreted as an enabler of credit in adequate conditions and a promoter of strategic industries. Economic impact assessments are not unknown in Spain so as to evaluate the need of reforms, to design more effective legal solutions or to anticipate costs and risks likely to arise from an envisaged action. Notwithstanding that awareness, an economic analysis is not always conducted in the process of legal reform or, if undertaken, it is rarely the only deciding factor. In any case, it may be reasonably said that economic benefits of the Cape Town Convention may have been one of the factors considered in the decision to ratify. Nevertheless, no specific empirical analysis supporting that statement has been expressly mentioned or made public knowledge along the process. Other factors may have been relevant as well. The ratification of the Convention is a strategic decision. It is a sign of modernization and a visible first step forwards among European countries,[2] especially, those ones holding leading positions in the key sectors.

Along with such specific benefits on selected industries, secured transactions rules are commonly seen as enablers of the financing market as a whole. In that regard, it may be asserted that the idea that a strong security interest facilitates access to credit and globally benefits both creditors and debtors is widely shared in business-to-business transactions. When consumers and non-professional debtors are involved, however, social perception is probably the opposite. The distorting effects of last economic crisis aggravated by high levels of over-indebtedness[3] in certain social groups depict a very different image of secured transactions. Hence, in consumer financing transactions, security interests can be to some extent interpreted as instruments of abuse aimed to solely protect strong creditors, mainly financial entities, against weak parties. Such an economic situation could have debilitated the mainstream idea that security interests encourage credit flow.

Nevertheless, since the Cape Town Convention deals with high-value transactions between sophisticated parties in strategies industries, value perception is not, as previously stated, conditioned by such sociological factors or the economic situation, at least, not so intensively.

A total exploitation of economic benefits and strategic advantages requires completing the international commitment with the prompt ratification of any of the Protocols, predictably the Aircraft Protocol. Insofar as the reason to postpone the ratification of the Protocol seemed to be the need of a prior reform in the domestic legal framework and the registry system, seminars, workshops and professional meetings have been organized to discuss critical issues, contrast opinions and disNamely, France, Germany, Italy and United Kingdom that rank among the first four economies in the European aerospace industry. Encouragingly, an announcement on UK’s decision to proceed with ratification of both the Convention and Protocol as it relates to aircraft has been published in December 2013. Since further steps are required, ratification is expected in the near future.

close concurring interests. On the occasion of those meetings, it has been repeatedly emphasized the importance of paying careful attention to implementation. Should Convention provisions be not properly implemented or should existing domestic rules or practices be likely to hamper the functioning of the International Registry, expected benefits might greatly vanish.

Special concerns were aroused in relation to the registry system and registration rules. Although Spain counts on a sound, modern, efficient and highly computerized registry system and some existing registry regulations are already in process of reform[4] to contemplate the operation of the International Registry, registry models and philosophies are visibly divergent, albeit not irreconcilable. Very simply, as a mere sign of that divergence, Spanish registration model is overall based on a document-filling registry (with some nuances) conducted by active Registrars. To the extent that Spain opts for, as it was highly expected and was indeed finally confirmed, designating a national entry point and principles governing national registry systems may differ from the registry model designed by the Cape Town Convention, it should be carefully considered the interrelation between registry systems in order to anticipate and minimize contradictions (eventual fees, required documentation, Registrar review). In that regard, I have expressed[5] my deep concerns about the rules and procedures laid down by the new Regulations for the Aircraft Register aimed to regulate the operation of the national entry point and its interaction with the International Registry. To my mind, such rules and procedures are not consistent with the spirit, the conceptual scheme and the rules of the Cape Town system. Contrarily, in its current version, a prior registration of international security interests in the national entry point seems to be required in clear contradiction with the autonomous, independent and sui generis character of international security interests that are not dependant on national requirements nor registration in local registries. A ‘last-minute’ resolution adopted on 29 February 2016 by the General Directorate of Registrars and Notaries approving the form to apply for the issuing of the Unique Authorization Code by the national (authorising) entry point and the IDERA form aims rightly to amend the previous inadequate rules. Nonetheless, some questioning comments on the said resolution can still be posited. Such subsequent actions have tried to amend the effects of those above-referred wrong provisions and ensure today a normal functioning of the national entry point on a regular basis.

In that point, the conviction that a proper implementation is crucial is conducting discussion in professional and institutional forums. A proper implementation casts on two dimensions. On the one hand, a carefully pondered list of declarations and an adequate wording of them. On the other hand, a reform of national system in those aspects likely to hamper, if not duly amended, the full exploitation of the uniform instrument’s expected efficiencies.

  • [1] Data on Spanish railways in the European context in the report published by the RailwayObservatory available at http://www.observatorioferrocarrLl.es/archivos/Ofe20n/ObservatorioFerrocarril_2011.pdf
  • [2] On December 7, 2014, besides European Union as a regional economic integration organisation(Article 48 Convention), only Ireland, Luxembourg, Netherlands, Malta, Latvia and Spain haveaccessed to the Convention. And all of them, save for Spain, have also accessed to the AircraftProtocol.
  • [3] From the perspective of suretyships, some comments on that social perception in Teresa Rodriguezde las Heras Ballell, ‘Protection from Unfair Suretyships in Spain’, in Aurelia COLOMBICIACCHI; Stephen WEATHERILL (Eds.), Regulating Unfair Banking Practices in Europe: TheCase of Personal Suretyships, Oxford University Press, Oxford, 2010.
  • [4] The old Decree 419/1969, of 13 of March of 1969, regulating the Registry of Aircraft is in process of reform. The new text would include express provisions regulating interconnection betweenthe Registry of Aircrafts and the Registry of Movable aimed to enable the application of the CapeTown Convention.
  • [5] Teresa Rodriguez de las Heras Ballell, ‘El nuevo Reglamento de matriculation de aeronavesciviles, y el Convenio de Ciudad del Cabo y su Protocolo sobre garantias internacionales en ele-mentos de equipo aeronautico’, 15 Revista de Derecho de Transporte: Terrestre, Maritimo, ASreoy Multimodal, 2015, pp. 235-257; and Teresa Rodriguez de las Heras Ballell, ‘La adhesion deEspana al Protocolo Aeronautico del Convenio de Ciudad del Cabo y su implementation: unaprimera valoracion del nuevo Reglamento de Matriculation de Aeronaves’, 2 Bitacora MilleniumDIPr 88, 2015 - Part I http://www.millenniumdipr.com/ba-29-la-adhesion-de-espana-al-proto-colo-aeronautico-del-convenio-de-ciudad-del-cabo-parte-i, Part II: http://www.millenniumdipr.com/ba-30-la-adhesion-de-espana-al-protocolo-aeronautico-del-convenio-de-ciudad-del-cabo-parte-ii -.
 
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